Tag Archives: renewal decision rate

Is putting added emphasis on pushing customers early and often for a decision to renew is worth the effort? According to a 2011 report from Morgan Stanley, on average, for the technology sector, 30-40% of the revenue and about 50% of the profits are driven by recurring revenue. For those exclusively focused on web-based software or services, the numbers are obviously going to be higher.

There are a few other factors to consider, the specifics of which will vary by industry:

Many companies that depend on recurring revenue models do so knowing that it takes roughly the first year of revenue to pay back the acquisition cost. Renewals are the only road they have to profitability.

Confirming the renewals is actually a two step sales process; getting the decision and then confirming the close.

Over 45% of customers who did not renew their contracts, claim they were not contacted to ask for the renewal*

By one month, the renewal rate for contracts that have expired will be about half of what it could have been if followed up earlier.

So, is a concerted effort to get a yes/no renewal decision from your customers worth the effort? Yes. Clearly it is.

Use a multi channel approach to gain the decision. Realistically, almost everyone will use email as their first line of contact. It’s fast, easy, cheap and should do a decent job to gain the easiest decisions. Everyone already knows that much, but that 45% number, who claim they were never contacted flies in the face of emails adequacy as a sole source of contact. It’s much too easy to ignore and this decision is too important to the financial future of the vendor to be ignored.

The second line of contact is to call. This is the quickest, surest way to cut through the clutter of the email environment and guarantee that your customers know you are looking for a renewal decision. Start your calling 120 days ahead of the renewal date.

In the early stages, if you haven’t used the phone already to support your customer service outreach or customer nurturing programs you’ll probably find that the contacts you thought you were communicating with aren’t there anymore. So you’ll need to find the new influencers. You are going to hit voicemail, so plan a series of intelligent and compelling messages and use them along with your continuing emails to get a yes/no decision. If you’ve put a good sales process in place, those specific responses will prep your sales team for their closing calls.